Correlation Between GREENLIGHT CAP and Bayer AG

Can any of the company-specific risk be diversified away by investing in both GREENLIGHT CAP and Bayer AG at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GREENLIGHT CAP and Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GREENLIGHT CAP RE and Bayer AG NA, you can compare the effects of market volatilities on GREENLIGHT CAP and Bayer AG and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GREENLIGHT CAP with a short position of Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GREENLIGHT CAP and Bayer AG.

Diversification Opportunities for GREENLIGHT CAP and Bayer AG

-0.88

Correlation Coefficient

GREENLIGHT CAP  Bayer AG

Pay attention - limited upside

The 3 months correlation between GREENLIGHT and Bayer is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding GREENLIGHT CAP RE and Bayer AG NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG NA and GREENLIGHT CAP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GREENLIGHT CAP RE are associated (or correlated) with Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG NA has no effect on the direction of GREENLIGHT CAP i.e., GREENLIGHT CAP and Bayer AG go up and down completely randomly.

Pair Corralation between GREENLIGHT CAP and Bayer AG

Assuming the 90 days trading horizon GREENLIGHT CAP RE is expected to under-perform the Bayer AG. But the stock apears to be less risky and, when comparing its historical volatility, GREENLIGHT CAP RE is 1.62 times less risky than Bayer AG. The stock trades about -0.3 of its potential returns per unit of risk. The Bayer AG NA is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Bayer AG NA on September 23, 2024 and sell it today you would lose (86.00) from holding Bayer AG NA or give up 4.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

GREENLIGHT CAP RE  vs.  Bayer AG NA

GREENLIGHT CAP RE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAP RE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, GREENLIGHT CAP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Bayer AG NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GREENLIGHT CAP and Bayer AG

The main advantage of trading using opposite GREENLIGHT CAP and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GREENLIGHT CAP position performs unexpectedly, Bayer AG can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bayer AG will offset losses from the drop in Bayer AG's long position.

The idea behind GREENLIGHT CAP RE and Bayer AG NA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.